Banks are paying an increasing proportion of corporation tax

18 December 2015

​New figures from SKAT (the Danish Central Tax Administration) show that Danish banks are a relatively large contributor to the Treasury and thereby also to the financing of Danish welfare.

In 2014, banks contributed approximately DKK 4 billion to the Treasury’s overall revenue from corporation tax. That amounts to 7.3 per cent of the overall corporation tax in Denmark, which in 2014, made up around DKK 55.5 billion in total.This should also be seen in connection with the fact that Danish banks account for around 2 per cent of the total employment in the private sector.

Although bank corporation tax payments fell during the first year of the financial crisis, amongst other reasons as a result of losses, the latest numbers show that bank contributions to the Treasury’s corporation tax revenue have been increasing in recent years.

“The fact that revenue is increasing is very good both for society and bankers, as this means that tax payments are also increasing. The sector has been hit hard and is starting to recover again, even though it is happening under difficult conditions with low interest rates and modest demands for loans. But the fact that the sector is earning money will benefit Danish society and also strengthen opportunities for banks to support economic growth,” says the CEO of the Danish Bankers Association, Ulrik Nødgaard.

Figure 1. Proportion of corporation tax payments by banks

N.B.: Percentage of Treasury revenue from corporation tax from group 1-4 financial institutions in 2012-2014

Source: Calculations by SKAT and the Danish Bankers Association

In 2012, 4.8 per cent of revenue could be attributed to banks. In 2013, this figure rose to 5.8 percent and then increased again in 2014 to 7.3 per cent.

This corresponds to an overall increase in corporation tax payments of around DKK 1.7 billion. The increase in tax payments happened while overall corporation tax was reduced in the meantime.

In addition to corporation tax, banks annually contribute billions of Danish kroner in payroll tax, which is a tax that the financial sector pays instead of VAT, and which is attached to taxes on salaries. In 2014, the collective banking sector paid payroll taxes equivalent of around DKK 2.6 billion.